MS/DOJ: Barksdale testimony heats up

Attempting to pry open cracks in the government antitrust case, an attorney for Microsoft grilled Netscape Communications president and chief executive officer Jim Barksdale in federal court this morning, trying to undermine his credibility.

Microsoft trial attorney John Warden hammered at an increasingly testy Barksdale, reviewing the Netscape executive's 126-page written statement -- released late Monday -- paragraph by paragraph and questioning nearly every assertion.

Microsoft's defense strategy became clearer, as Warden focused on statements and memos made by Netscape executives prior to a June 21, 1995 meeting between Microsoft and Netscape officials.

It was during this meeting, the government alleges, that Microsoft made an offer to divide the Internet browser software market with Netscape, and when the offer was rebuffed, illegally used its monopoly position to attempt to "crush" Netscape.

In his cross-examination of Barksdale this morning, Warden set out to show that it was Netscape, prior to the June 1995, that first approached Microsoft with the idea of the software giant's taking an equity stake in and cooperating with Netscape.

Warden entered into evidence an electronic mail message from Netscape founder Jim Clark to Microsoft's general manager of new technology, Dan Rosen, dated Dec. 29, 1994. At that time, Microsoft was considering licensing a version of the Mosaic browser from Spyglass.

In the memo, Clark wrote in part: "I'd like to convince you to reconsider using our Netscape client and apologise for the miscommunication with (Netscape executive) Paul Koontz; I was not aware of the details of his interaction with you, or I would have expressed things differently."

Clark goes on to say that Microsoft, if they acquired Mosaic technology, would "waste" a lot of time debugging the software.

"Microsoft is the de facto client software company and we have never planned to compete with you so we have never considered a client as being our business," Clark wrote to Rosen. "Our business is adding value on the back end in the form of vertical applications currently using Oracle databases," Clark said in his memo.

Trying to show that it was not Microsoft that later simply tried to force its will on Netscape, Warden also underscored the following, from Clark's memo: "We want to make this company a success but not at Microsoft's expense; we'd like to work with you. Working together could be in your self-interest as well as ours. Depending on the interest level you might take an equity position in Netscape with the ability to expand that position later."

Warden juxtaposed this offer of cooperation from Clark with Barksdale's written testimony about the June 1995 meeting, trying to show that the meeting was merely a continuation of talks the companies had started months before. Barksdale has said of the meeting in his statement, "Microsoft apparently came to Netscape with a single focus: to convince Netscape not to compete with its Windows 95 browser product, Internet Explorer. Microsoft proposed a division of the browser market between our companies ..."

Under Warden's grilling, Barksdale today acknowledged that no one at the meeting used the phrase "divide the market", although, Barksdale maintained, that threat to force Netscape to collude to divide the browser market was explicit.

Today, Barksdale downplayed some of the points in Clark's memo to Rosen. Barksdale acknowledged that although Clark had talked to him about a potential deal with Microsoft, Clark had also said "it was not significant; he said he had made an offer to them ... and they had rejected this".

Warden also noted today that in Clark's deposition in preparation for the antitrust trial, the Netscape founder acknowledged that he knew of Microsoft's plans to incorporate its browser into the Windows operating system because of a speech he attended by Microsoft Chief Executive Officer Bill Gates in October 1994.

In Clark's testimony quoted by Warden today, he said: "I decided to give it away free because Bill Gates told me he was going to give it away free before our first beta and I felt like we would have to in order to survive against Microsoft."

But Barksdale today maintained that he was not aware of the details of Microsoft's plans -- including plans to integrate the browser with Windows, until late in 1995.

Warden's cross-examination of Barksdale got heated, and the two argued over even routine contentions, such as what exactly constitutes browser software. If "it walks like a duck, quacks like a duck -- it is a duck", Barksdale ended up saying.

The cross-examination of Barksdale is expected to continue all day Thursday. The 55-year-old polite, gentlemanly businessman is the government's star witness in the case. His 126-page written statement is a damning testament to how he says Microsoft wielded its monopoly control over the PC operating system market to cut off Netscape's ability to distribute its browsers through computer manufacturers and Internet service providers (ISPs). Ultimately, Barksdale says in his statement, Microsoft forced Netscape to give away its browser for free - eliminating what was once a revenue source of $US60 million per quarter for the company.

The page-by-page attempt to impeach Barksdale's statements, his credibility and ultimately his claims regarding Microsoft is essential to the defense. The cross-examination, while occasionally riddled with light moments, has been pain-staking and at times tedious to the point that some of the government's lawyers appeared to be nodding off during the afternoon session.

When Warden asked Barksdale to examine a paragraph on page 119 of his written testimony, after having only gotten up to page 24 in the morning, there were hopeful murmurs from the courtroom that he was coming to a conclusion.

"We're not skipping everything in between," Warden then said, nipping that speculation in the bud.

The attorney was attempting to hammer home several points through his questioning of Barksdale. First, he established that Netscape, despite Microsoft's competition, has been earning more revenue each year since the company was founded in 1994. Second, Netscape browsers still retain a large share -- if not the 85 per cent majority it once held -- of the market for Internet browsers. Third, many product reviewers have found Microsoft's latest browsers superior to those from Netscape and have said so in print.

Barksdale, at times folding his arms across his chest and becoming argumentative, still held his ground on key points. Barksdale admitted that Netscape expects its browser to be distributed to 68 million computers in the next six months and that the company has more than 7000 partners to help distribute the products, including 4285 Internet service providers, 520 computer manufacturers and 1546 content providers.

But when Warden quizzed the witness about whether home and business users were free to download Netscape's Communicator browser from the Web, Barksdale refused to concede that consumers had a choice. "Most people won't go to the trouble to do it," he said.

And when Barksdale was pressed about whether the competition from Microsoft had led Netscape and other companies to innovate with browser technology, Barksdale said the opposite was true. "They have reduced innovation for all people who would have been working in this area by giving it away for free and making it non-economical to improve on the product," he said.

Outside the courthouse, Netscape representatives attempted to do damage control regarding the e-mail and statements of Clark. Christine Varney, who is an outside counsel for Netscape, gave an impromptu press conference after this morning's session, pointing out that the last line of the Clark e-mail to Rosen, which Microsoft didn't show, was "No one in my organisation knows about this message."

Varney also pointed out that Clark's memo was written in late December 1994. "It was the end of the year, the product hadn't shipped, investment was running out and .... I think he (Clark) was a little nervous."

In any case, Varney said, Microsoft rejected the offer.

Barksdale is the first witness called in the case. The trial opened Monday, five months after the US Department of Justice and 20 state attorneys general filed broad antitrust actions against Microsoft in US District Court in the District of Columbia. The actions have been joined in the current trial. The judge has ruled that all direct testimony from witnesses will be in the form of written statements and that witnesses in the courtroom will start with cross-examination. When Microsoft's attorneys conclude with Barksdale, it is expected that government attorneys will begin questioning him on redirect testimony, which is likely to begin next week.

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